90,000+ Legal Questions Answered

Issue with Development team for a app based startup when 90 percent payment is done Issue with Development team for a app based startup when 90 percent payment is done

1 year ago

Issue at hand: The Development team has stopped the development process, asserting that certain tasks completed after signing the contract in March 2022 fall outside the agreed scope, meaning they were additional tasks not initially covered in the contract (Added in attachment for Reference). The Development team claims they haven't been compensated for this additional work. They have offered two options: either deliver the in-scope items within 30 business days or provide the entire code as it stands, but this is contingent on the Client paying for the out-of-scope work, for which the Development team has presented a bill (Added in Attachment for Reference). However, the current code is plagued with numerous bugs and suboptimal coding practices, rendering it consistently unusable. Consequently, the Client intends to terminate the development process and seek an alternative solution elsewhere. The Development team did not intimate the Client at any time before building this code in the application during the development process that these are additional and out-of-scope work, while they have brought some items as additional billables and after mutual agreement the additional cost has been agreed to be paid by the Client at the time of delivery.

In response, the Client has chosen to pursue a legal resolution regarding the out-of-scope claims in court. The Development team maintains that they have full ownership of the code and the liberty to use it as they see fit. The Client has requested that the Development team delete the out-of-scope code, as per the Development team's definition, but the Development team has not only refused this request but also retracted their offer to provide the in-scope code, insisting they will only deliver the complete code upon receiving full payment. The Development team argues that they cannot continue incurring losses on this project.

The Client's proposed final resolution is to obtain the in-scope code while having the out-of-scope items (as defined by the Development team) removed, as these were created using the Client's resources and ideas. Alternatively, the Client suggests waiting for the court's decision on the validity of the Development team's out-of-scope claims and then implementing the court's verdict regarding code ownership and disposition.

The proposed resolution has been conveyed to the Development team, and the Client is currently awaiting their response. The Client has also reached out to the Development team to schedule a meeting to expedite the process since the delays have extended the originally anticipated three-month timeline to nearly two years.

(Bangalore, Karnataka)

S. K. Dutta

View All Answers
A.Dear Client,
From the contents of your query and the nature of your dispute, it prima facie appears to be a commercial dispute as defined under Se.2(1)(c) of the Commercial Courts Act, 2015 and that requires to be adjudicated by a Commercial Court constituted under sub-section (1) of section 3 of the Commercial Court Act, 2015. A commercial dispute has to be instituted as per the provisions of sections 16 to 20 of the Code of Civil Procedure, 1908 (5 of 1908). As per Sec.12A(1) of the Act, a commercial suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government. As per Sec.12A(4) of the Act, f the parties to the commercial dispute arrive at a settlement in the course of the pre-institution mediation process, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator. The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996. In view of the above proposition of relevant law, you may consult with an Advocate or a solicitors firm that handles commercial disputes before the Commercial Court for guidance and steps.
Helpful
Helpful
Share

Post Your Matter Post Your Matter

Talk to a Lawyer Talk to a Lawyer

Ask a question Ask a question

Vidhi Samaadhaan Vidhi Samaadhaan

Vidhikarya

A.Dear Client,
The first step in any legal dispute is to review the contract thoroughly. Contracts typically define the scope of work, payment terms, and any clauses related to changes in scope or additional work. This will be a critical document in determining each party's rights and obligations. Further, the ownership of the code is a crucial issue. If the contract does not explicitly state the ownership of the code, Indian copyright laws may apply. Ensure that you have documentation showing that the code was developed using your resources and ideas.
Helpful
Helpful
Share

Post Your Matter Post Your Matter

Talk to a Lawyer Talk to a Lawyer

Ask a question Ask a question

Vidhi Samaadhaan Vidhi Samaadhaan

Read Related Answers

question iconOur company has supplied goods to a well know company
Dear Client, A dispute between traders or businessmen is considered a commercial dispute and the remedy lies with the Commercial Court constituted under the Commercial Court Act, 2015. A commercial d...
question iconRental House Notice Period Confusion
Dear Sir, Your proposal is correct. Accordingly, you can pay the rent and stay in the premises even otherwise you can extend your stay by paying the rents regularly.
question iconSecurity deposit refund
Dear Sir, You may get issue a legal notice and threaten to approach Civil Court if remaining account is not paid.
question iconThreatening
Dear Client, In the absence of any agreement/contract, you are not considered to be an employee of that Company, so, the rules or policy of the Company does not apply to you. So, you need not worry po...
question iconCoding ninjas asking me to pay fee penalty
Dear Sir, You need not pay anything to them. It is rare for them to approach Civil Court for recovery of amounts. If any legal action is received get it appropriately replied through your Advocate.